The UK financial system grew in November, helped by stronger providers exercise in the course of the World Cup, in a shift that defied expectations and is prone to enhance strain on the Financial institution of England to boost rates of interest.
Gross home product elevated 0.1 per cent between October and November 2022, the Workplace for Nationwide Statistics said on Friday. A Reuters ballot of economists had forecast a 0.2 per cent contraction.
“The financial system grew a little bit in November with will increase in telecommunications and pc programming serving to to push the financial system ahead,” mentioned Darren Morgan, ONS director of financial statistics. “Pubs and bars additionally did properly as folks went out to observe World Cup video games.”
November’s output enlargement was “undeniably encouraging,” mentioned Ruth Gregory, economist at Capital Economics, who added that the UK authorities’s value of dwelling funds meant that households had extra cash in November.
November’s GDP development may signify that the UK economy prevented a technical recession, outlined as two consecutive quarterly contractions, on the finish of 2022. Output fell for the third quarter of final 12 months.
This “will solely add to the strain for the Financial institution of England to boost rates of interest farther from 3.5 per cent, maybe to 4.5 per cent within the coming months”, Gregory mentioned of Friday’s figures.
Markets have priced in a 57 per cent chance that the Financial institution of England will increase its charge by 50 foundation factors from the present 3.5 per cent at its subsequent assembly on February 2. Rates of interest have risen sharply from 0.1 per cent in November 2021 because the BoE battles with very excessive inflation.
Regardless of its resilience in November, the UK financial system has been struggling below the burden of excessive inflation and rising borrowing prices. Within the three months to November, the financial system fell by 0.3 per cent in contrast with the earlier three months.
In November, output was nonetheless smaller than in its current peak of Might 2022 and remained 0.3 per cent under its degree in February 2020, earlier than the pandemic. Output from consumer-facing providers, comparable to retailers and eating places, was 8.5 per cent under pre-coronavirus ranges.
That is in distinction with all different G7 economies the place by the third quarter GDP had already recovered from the impression of the well being disaster.
Thomas Pugh, economist at consulting agency RSM UK mentioned a recession within the UK was “delayed, not cancelled”, since shopper spending was prone to falter because the squeeze on family actual incomes intensified.
“We proceed to suppose that GDP will drop considerably in Q1 and Q2,” added Samuel Tombs, economist at Pantheon Macroeconomics, who emphasised that the UK authorities will cut back power worth assist considerably within the second quarter.
Main economists surveyed by Consensus Economics forecast UK GDP would shrink by 1 per cent in 2023, a a lot bigger drop than the 0.1 per cent fall forecast for the eurozone and in distinction with the 0.25 per cent enhance anticipated within the US.
Separate ONS information, additionally revealed on Friday, confirmed {that a} current fall in fuel costs helped to slender the UK’s massive commerce deficit by £6.5bn to £20.2bn within the three months to November in contrast with the earlier three months.
The autumn in fuel costs can be anticipated to scale back strain on family funds in addition to offering some financial savings for the federal government.
Chancellor Jeremy Hunt mentioned: “A very powerful assist we can provide is to stay to the plan to halve inflation this 12 months so we get the financial system rising once more.”
